Tech evolution rather than revolution
In light of B3i’s recent closure, The Insurer spoke to Igor Best-Devereux, CEO of eReinsure, about the future for insurtech, placing platforms and collaborative utilities…
You’ve previously highlighted adoption as the main constraint to success in e-placing – has this progressed during the pandemic?
The pandemic provided some new opportunities. Changes have included the continuation of remote working for many in our industry. Our customer base has continued to increase. If we look at the Insurance Information Institute’s list of commercial lines insurers by direct premium written, I can say that nine out of the top 10 US insurance groups are customers. Globally we can claim five of the top 10.
Over the years we’ve facilitated more than a million transactions and thousands more each month. We’re pleased with progress and there’s a lot of road behind us but there’s still a long road ahead. It’s unrealistic to think that there is a sudden change in behaviour – we are talking about insurance after all. Evolution rather than revolution.
Realistically companies in the market are pressing on with business. As we have seen, even a global pandemic isn’t going to suddenly change that direction. Technology is an enabler and so vitally important, but no one is just waiting hoping that something new and shiny will solve all the problems. Tools like eReinsure have evolved substantially over the years and so it’s a matter of priority – and back to your earlier question, that drives adoption.
”We’re pleased with progress and there’s a lot of road behind us but there’s still a long road ahead. It’s unrealistic to think that there is a sudden change in behaviour – we are talking about insurance after all. Evolution rather than revolution”
The next big thing that might shift priorities and so increase the rate of change is inflation. We have had a pretty positive trading environment with increased rates over the past few years, which is reflected in greatly improved combined ratios and results in some areas of the market. But costs have been creeping up. Damping these down is going to be a challenge over the next few years and technology – including B2B distribution tools – will be a contributor to that effort. We can expect some focus on efficient distribution as there is the potential for divergence in the cost impact on different sectors. You can expect carriers in particular to be increasingly cost-conscious and to invest in productivity as we all battle through what may be a few years of high inflation.
You mentioned evolution – where are we with placing technology on that scale between primordial soup and homo sapiens? How do you see the next phase of evolution?
Well hopefully it’s not going to take that long! There are different areas of the insurtech business that are more or less evolved. In our case, we’ve focused on the specific area of networking together the buyers and sellers of reinsurance. This type of B2B transaction lends itself to a market network connecting businesses to each other and improving management of the process. This involves multiple elements that can impact the total cost of distribution including consistency, quality, data and automation. As far as the evolution of eReinsure is concerned, we started small, learned as we went along and evolved our platform in line with general enhancements in online technology.
We’ve seen a surge in interest in supporting data transfer to other systems. This has required us to modify our approach from just building, improving, updating and supporting our platform to projects that involve working in close collaboration with our customers. Our experience has been that these integration projects are often somewhat unique. We can support them with our framework of connections, such as REST APIs, but the data coding and data structure is often company-specific and a translation layer is often required.
As you know, the industry has spent a huge amount of time and money on the question of data standards and there has certainly been some good work done. But data quality remains a hurdle to the many promises of cost savings and the potential for machine learning, AI and the rest. The reality on the ground is that companies are working with the systems they have and moving forward as quickly as they can with integration between systems to get the advantages of data interchange. We see this because we provide what is effectively a network hub that extends across the market. The difficulty that we all experienced achieving some standards and getting adoption of those 20 years ago has been a lost opportunity for the market but it is what it is. The focus now is on driving integration. Fortunately the technology itself is helping with, for example, the evolution from XML to JSON. Part of the evolution of our platform and our company is the ability to more quickly implement solutions in this area.
Against a backdrop of billions of dollars invested in insurtech, it sounds like you are saying that there is still a long way to go?
It’s always going to be a long journey. It’s not just about how much money you spend, it’s a lot about what you do with that investment and experience in navigating the peculiarities of the market. That’s where the experience that we have at eReinsure is so valuable – experience gained in collaboration with our network of participants on the eReinsure platform over more than 20 years. Remember that a lot of the insurtech investment has been in the capital-intensive part of the business. Essentially competing with established insurers that are evolving their own technological capabilities. It’s unclear that the value created by use of technology in an insurer start-up outweighs the competitive advantage of established brands and their deep expertise.
”It’s not just about how much money you spend, it’s a lot about what you do with that investment and experience in navigating the peculiarities of the market”
We think the most bang for the buck is in the B2B networking of the market and building improved efficiency and lowering the total cost of distribution of risk to capital. This especially means eliminating redundant manual effort. Even offshoring will look expensive over time. The foundation is improved process and data collection across the network, which in turn supports quality service and the ability to extend analytics to better support decision making on pricing. Throughout this ecosystem real value is being added by companies like eReinsure working with established players across the market.
Brokers have often been distrustful of platforms, seeing them as potentially a form of disintermediation. Is this still the case?
This really comes back to the question of total cost of distribution. There are some parts of the distribution process that can be common across multiple companies and channels. It’s why eReinsure was formed as an independent company and why we continue to operate autonomously – serving many customers in the market. Like a utility, this enables cost sharing as most of our customers, whether they be carriers, reinsurers or brokers, have common needs for networking with market participants and moving data. It’s pretty clear that buyers of reinsurance want choice and the top brokers field a range of services including technology-enabled analytical capabilities. These services are aimed at distinguishing one from the other. But ultimately the carriers are the source of reinsurance business and they distribute that to the worldwide reinsurance markets both directly and via multiple intermediaries. All of the big brokers see business originating via the eReinsure platform and as an independent platform this provides an efficient network without the channel conflict that would arise if the transaction workflow was via a broker-provided platform. Brokers will differentiate their services by technical expertise in risk management and structuring and we will continue to provide a network platform that they can all use.
How does a technology provider think about the ESG challenge?
The environmental part is a challenge for the industry to measure and improve. I do think there’s a sense that technology can be a positive force – greater efficiency, less paper, less carbon footprint – but you only have to look at crypto mining to see there are contradictions as well. I think a platform like ours scores highly in the area of control and data transfer – both have been labour-intensive in the past and we contribute real benefits for governance. From the standpoint of sustainability of the market overall technology is also vital as a means of reducing cost and improving efficiency.
I’m also very proud of our record on diversity and inclusion. I think technology companies have often been ahead of the pack. We employ people for technical skills and the diversity of our team over the years has been key to adding multiple perspectives as we work on technical solutions. I think insurtechs like eReinsure are a net benefit to the market in bringing in a younger generation with new skills.